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India Expects Environmental OK for POSCO Plant Soon

India's steel ministry said it expects South Korean steelmaker POSCO's proposed plant in the eastern state of Orissa to receive environmental clearance within a month, even though land acquisitions for the project have been halted after objections from the federal environment ministry.

"There is some difference in the facts related to the POSCO case between the Orissa state government and the ministry of environment. We expect these to get resolved soon," steel secretary Atul Chaturvedi told reporters at a conference.

The world's third-largest steelmaker by output signed an initial pact with the Orissa state government five years ago to build a plant with a capacity of 12 million tons a year at an investment of more than $10 billion.

However, fierce protests from local landowners, many of whom are unwilling to lose their homes and farms to the project, have stalled progress.

Last month, the state government started acquiring land for the plant, despite sporadic protests. On Friday, however, the federal environment ministry halted the acquisitions, saying they were illegal since the ministry hasn't yet approved the project.

The federal ministry also said the state government had falsely claimed that tribes didn't live and farm in the 1,235 acres of forest sought for the plant, despite "oral and documentary evidence" to the contrary.

"If need be, we will take up the matter with the ministry of environment and forest for speedy clearance of POSCO's Orissa project," Steel Minister Virbhadra Singh added.

However, the steel ministry lacks any administrative authority to instruct the environment ministry about granting clearance for the project; all the steel ministry can do is present its views to the environment ministry and hope it sways the bureaucrats.

POSCO isn't the only top-10 global steel producer whose plans to build a mega-plant in India are close to being squashed. ArcelorMittal and Tata Steel also face similar hurdles getting their five- to six-year-old projects off the ground.

While India needs steel to build cars and houses, it may be tough to get new plants up and running as long as the government and companies don't get the support of local tribes and villagers.

POSCO is now looking at other avenues to start production in India. It is seeking to form a joint venture with state-run Steel Authority of India Ltd. to build a 1.5 million metric tons a year steel plant in the eastern city of Bokaro, SAIL chairman C.S. Verma said.

While the plant is less than a 10th the size of its proposed Orissa plant, it will at least provide the Korean company a toehold in a country, where demand for steel is expected to grow at more 10% a year over the next decade.

ArcelorMittal also acquired a stake in galvanized steelmaker Uttam Galva Steels Ltd. last year to gain entry to the Indian market while it waits for its three proposed greenfield plants to get off the ground.

Mr. Verma said the joint venture with POSCO could be formed by November. "The likely investment in the plant will be 100 billion rupees ($2.14 billion)-120 billion rupees," he said.

SAIL is also ready to offer 2,500 acres it owns in Bokaro for the joint venture plant, which will be based on POSCO's patented technology.